Saudi Aramco refiner hires banks for US$1 billion share sale

Saudi Aramco Base Oil, a refining unit of the state-owned oil producer, named banks including Citigroup and HSBC Holdings for its initial public offering on the Saudi stock exchange, which could raise about US$1 billion.

The company, also known as Luberef, is planning to sell 50 million shares, or a nearly 30 per cent stake, according to a statement. The price at which all subscribers in the offering will purchase the shares will be determined after the book-building period.

The company hired SNB Capital as lead manager, financial adviser, book-runner, global coordinator and underwriter. It also named Citigroup Saudi Arabia, HSBC Saudi Arabia, and Morgan Stanley Saudi Arabia as financial advisers, book-runners, global coordinators and underwriters.

The bidding period for participating parties and book-building process opens on Dec 4 for six days, according to the company’s prospectus. Subscription period for individual investors opens on Dec 14 for two days, and the announcement of the final allocation of the offer shares will be no later than Dec 22.

Saudi Arabia’s Capital Market Authority approved Luberef’s IPO plan last week. 

The refinery business, with operations in Saudi industrial cities Jeddah and Yanbu, is 70 per cent owned by Saudi Aramco, while the rest is held by local private equity firm Jadwa Investment. The offering consists of Jadwa’s sale of its shares in Luberef, while Saudi Aramco is keeping its stake. The offering could raise about US$1 billion, Bloomberg reported in June.

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The energy-rich Persian Gulf has been one of the world’s IPO hotspots this year, accounting for almost half the proceeds from new share listings across Europe, the Middle East and Africa. While share sales elsewhere have dried up amid aggressive interest rate rises, Middle Eastern markers have benefited from high oil prices, and Saudi Arabia alone has seen a record 27 IPOs this year, according to data compiled by Bloomberg.

Jadwa had acquired its Luberef holding in 2007 from Exxon Mobil. Exxon had originally invested in the refinery in 1978.

Luberef operates two production facilities in Yanbu and Jeddah on Saudi Arabia’s west coast. It produces various base oils and by-products including asphalt, marine heavy fuel oil and naphtha. They are mainly sold across the Middle East, North Africa and India. It also sells across Asia, the Americas and Europe.

Demand for base oils globally is expected to grow by about 5 million metric tons between 2022 and 2030, according to a company statement. “The demand outlook for base oils is further supported by strong macro fundamentals in Saudi Arabia and the broader Middle East region, which are key end-markets for Luberef.”

“Luberef will continue focusing on achieving growth in key end-markets, especially where market dynamics present attractive demand outlooks,” Tareq Alnuaim, president and chief executive officer of Luberef, said the statement. BLOOMBERG